Study found that tighter locks are economically preferable to moderate locks
London:
Due to the coronavirus crisis, many countries around the world are locked out. New research has found that a conservative approach to relaxing foreclosure restrictions that reduces the risk of subsequent foreclosure may be better for the global supply chain in the long run.
The study by researchers from UCL and Tsinghua University was published in the journal Nature Human Behavior.
This is the first peer-reviewed study to comprehensively assess the potential effects on the global supply chain of COVID-19 closures, by modeling the impact of the closings on 140 countries, including countries not directly affected by COVID-19.
The study found that tighter locks imposed earlier – like the two-month lock imposed in China – are economically preferable to more moderate locks imposed for four or six months, since the duration of the lock counts more for savings than their gravity.
Indeed, businesses can better absorb the shock of a brief lockdown by relying on reserves and because shorter closings cause less disruption to regional and global supply chains.
The researchers also found that countries not directly affected by Covid-19 could still experience significant losses of more than 20% of their GDP due to lower consumer demand and bottlenecks in the supply chains. supply.
Open or highly specialized economies, such as the Caribbean countries that depend on tourism and the Central Asian countries like Kazakhstan, which depend on energy exports, are particularly at risk. Global industries that depend on hard-to-replace suppliers, such as auto manufacturing, where production is expected to fall by half, are also vulnerable.
Lead author, Professor Dabo Guan (UCL Bartlett School of Construction & Project Management and Tsinghua University) said: “Our study shows the ripple effects caused by closures along global supply chains, countries not directly affected by COVID-19 still suffering heavy economic losses.
“While it is not possible to predict the true cost of closures at this stage, our research suggests that shorter, tighter closings minimize the impact on supply chains, while gradually easing restrictions during a year can also be less disruptive than a quick lifting of restrictions followed by another lockdown, “added Guan.
The researchers estimated that the gradual easing of the 12-month lockdown measures would minimize the impacts on the supply chain compared to the faster lifting of restrictions, over two months, then by introducing a second round of closings in January of next year, which they say would increase the cost of a – third.
Professor co-author Steven Davis (University of California, Irvine) said: “Our analysis quantifies the global economic benefits of strong public health responses and suggests that the economic justifications for reopening companies could backfire if they resulted a new set of closures. “
Looking ahead to a potential second wave, researchers have found that a tight, globally coordinated lockdown implemented for two months would be cheaper economically than closings that occur in different parts of the world at times different – thereby risking a potential economic loss to global supply. 50% chains instead of 60%. Indeed, the economic cost of a lockout exceeds national borders and a shorter one-off shock is easier to absorb.
Professor M. Guan said: “Businesses will survive supply chain failures caused by closures by relying on stockpiles or finding new suppliers. If a second shock hits, the reserves may be weak and supply chains only recently repaired – making a new rupture much more expensive. “
If recurring global closings occur, New Zealand’s food service sector and Jamaica’s tourism industry would suffer estimated productivity losses of around 90%, while China’s electronics business and the oil industry Iranians would suffer productivity losses of around two-thirds.
The cost to the UK economy, meanwhile, would drop from a potential supply chain loss of 38% (a gradually eased lockdown over 12 months) to 57% (recurring global bottlenecks occurring at different times in different countries).
In the United States, the cost to the financial sector would almost double if a second global foreclosure occurred, with a potential supply chain loss dropping from 33% (a gradually eased lockdown over 12 months) to 57% (blockages recurring global events occurring at different times In different countries).
The study found that the most important factor affecting the global economic cost of closures was the number of countries implementing them, highlighting the importance to a global economy of a country containing an epidemic.
Co-author Professor D’Maris Coffman (UCL Bartlett School of Construction & Project Management) said: “Just as people who stay at home protect others as well as themselves, countries that impose strict bans provide a public good to other countries.
“By preparing for the next pandemic, a global facility, in all likelihood administered by the IMF, could ensure that the costs of controlling an outbreak are not borne by one country. This would remove some of the barriers to action. fast and would provide huge long-term health and economic benefits, “said Coffman.
The document used an “ecological footprint” economic model to quantify the direct costs of closings in terms of labor reduction as well as the cascading effects of labor loss on the supply chain. ‘supply, simulating how production constraints affect upstream suppliers as well as businesses. to which the goods are delivered. Supply chain data was taken from the Global Trade Analysis Project (GTAP) database, which divides the world into 141 economies, with 60 sectors within each economy.
The researchers simulated three types of locking: a strict locking in which 80% of travel and work cease; more moderate locking with a reduction of 60%; a third, lighter lock with a 40% reduction in travel and labor. The strict 80% cut is roughly based on China’s foreclosure, during which the data suggests that 80% of trips have stopped, while the 60% foreclosure broadly reflects the approach taken in Europe and the states -United.
(This story has not been edited by GalacticGaming staff and is automatically generated from a syndicated feed.)
